the Group, Brattle. “FERC Staff Report. A National Assessment of Demand Response Potential” (2009).Abstract



    Section 529 (a) of the Energy Independence and Security Act of 20071 (EISA 2007) requires the Federal Energy Regulatory Commission (Commission or FERC) to conduct a National Assessment of Demand Response Potential (Assessment) and report to Congress on the following:

    •  Estimation of nationwide demand response potential in 5 and 10 year horizons on a State-by-State basis, including a methodology for updates on an annual basis;

    •  Estimation of how much of the potential can be achieved within those time horizons, accompanied by specific policy recommendations, including options for funding and/or incentives for the development of demand response;
    •  Identification of barriers to demand response programs offering flexible, non-discriminatory, and fairly compensatory terms for the services and benefits made available; and 
    • Recommendations for overcoming any barriers.
    Rudkevich, Aleksandr. “Economics of CO2 Emissions in Power Systems .” In, 2009.Abstract

    The paper analyzes the economics of CO2 emissions in power systems by introducing concepts of marginal carbon intensity (MCI) of electricity demand and shadow carbon intensities (SCI) of binding transmission constraints. It demonstrates that values of MCIs are time and location dependent and exhibit properties similar to those of locational marginal prices of power. These concepts and their properties are discussed using simple examples illustrating their importance and potential use in solving practical problems and designing CO2 abatement policies.

    Acting in Time on Energy Policy. Brookings Institution Press, 2009. Publisher's VersionAbstract

    Energy policy is on everyone’s mind these days. The U.S. presidential campaign focused on energy independence and exploration (“Drill, baby, drill!”), climate change, alternative fuels, even nuclear energy. But there is a serious problem endemic to America’s energy challenges. Policymakers tend to do just enough to satisfy political demands but not enough to solve the real problems, and they wait too long to act. The resulting policies are overly reactive, enacted once damage is already done, and they are too often incomplete, incoherent, and ineffectual. Given the gravity of current economic, geopolitical, and environmental concerns, this is more unacceptable than ever. This important volume details this problem, making clear the unfortunate results of such short-sighted thinking, and it proposes measures to overcome this counterproductive tendency.

    All of the contributors to Acting in Time on Energy Policy are affiliated with Harvard University and rank among America’s pre-eminent energy policy analysts. They tackle important questions as they pertain to specific areas of energy policy: Why are these components of energy policy so important? How would “acting in time”—i.e. not waiting until politics demands action—make a difference? What should our policy actually be? We need to get energy policy right this time—Gallagher and her colleagues help lead the way.

    Consilting, Navigant. Price Signals and Greenhouse Gas Reduction in the Electricity Sector . Navigant. Navigant Consulting, 2009.Abstract

    Excerpt from the Executive Summary

    Competitive electricity markets will play
    a vital role in the success of any market- based program for controlling heat-trap- ping emissions that contribute to climate change. Restructured competitive electricity markets help promote the technological in- novation and changes in consumer behav- ior required for a greenhouse gas (GHG) reduction program to be successful.

    Competitive wholesale and retail electricity markets were implemented to provide the financial incentives that encourage efficient electricity production and consumption patterns. Similarly, state and federal policy- makers are embracing“cap-and-trade”poli- cies (a.k.a the carbon market1) that rely on the same market forces and financial incen- tives to reduce GHG emissions – primar-
    ily carbon dioxide (CO2). President Barack Obama recently stated that he is interested in a cap-and-trade approach precisely be- cause he thinks the market makes decisions about these technologies better than the public sector.2 Policy supporters argue that
    a market-based approach to reducing GHG emissions will be the most cost-effective and result in more innovative approaches
    to emission reductions than other regulatory approaches. With non-utility competi- tive suppliers owning approximately 40 percent of today’s installed electric gener- ating capacity, it is therefore important to understand the complementary interaction between competitive electricity markets and market-based GHG policies.

    Celebi, Metin, and Frank Graves. VOLATILE CO2 PRICES DISCOURAGE CCS INVESTMENT . The Brattle Group. The Brattle Group, 2009. Publisher's VersionAbstract

    Climate policy proposals based on cap and trade mechanisms with tight caps will likely lead to highly volatile CO2 prices. This volatility is ignored in many studies, even though it can be expected to exceed that of natural gas and to exceed the wide ranges in CO2 price forecasts. Volatility will significantly increase investment risk, raise the cost of capital, and make it valuable to defer investments. The net result could be that CO2 price volatility becomes an impediment to the very investments that the climate policy is attempting to encourage. Compared to a carbon policy regime with more predictable carbon prices, we estimate that CO2 price volatility under current policy proposal could delay investment in low-carbon and carbon abatement technologies by 10 years or more. We propose that an effective policy to reduce this investment barrier would be a safety-valve mechanism that includes both a floor and a ceiling on CO2 prices. This would reduce volatility and protect both investors and customers from extreme carbon prices.

    Anderson, Edward J. “Mixed Strategies in Discriminatory Divisible-good Auctions.” In, 2009.Abstract

    Anderson, Edward J. , Pr Holmberg and Andrew B. Philpott. Mixed Strategies in Discriminatory Divisible-good Auctions. IFN Working Paper No. 814, 2009. 72 pages.

    Using the concept of market-distribution functions, we derive general optimality conditions for discriminatory divisible-good auctions, which are also applicable to Bertrand games and non-linear pricing. We introduce the concept of offer distribution function to analyze randomized offer curves, and characterize mixed-strategy Nash equilibria for pay-as-bid auctions where demand is uncertain and costs are common knowledge; a setting for which pure-strategy supply function equilibria typically do not exist. We generalize previous results on mixtures over horizontal offers as in Bertrand-Edgeworth games, but more importantly we characterize novel mixtures over partly increasing supply functions.